Executive order seeks to weaken ACA insurance rules, another would end cost-sharing payments

Frustrated by the failure of GOP efforts to repeal the Affordable Care Act, President Donald Trump signed an executive order Thursday to ease ACA rules and give individuals and businesses access to cheaper health plans with fewer benefits and consumer protections.

Several news sources later reported that Trump on Friday would seek to end cost-sharing subsidies to insurers. The subsidies, which this year cost the federal government $7 billion, help low-income people pay for insurance coverage.

The order easing the ACA rules will have to be implemented through the time-consuming federal rule-making process, making it unlikely the changes will take effect in time for the 2018 plan year. And experts said it's likely to face legal challenges that could create further delays.

The White House said the goal was to offer more affordable coverage to people if they band together through business and occupational associations to get plans. It could go a long way toward achieving the Republican goal of gutting ACA market rules and allowing consumers to buy stripped-down coverage in a less-regulated market.

"Our members are clamoring for more options, and association health plans are certainly one way to get that option," said Kevin Kuhlman, director of government relations at the National Federation of Independent Business.

But many insurance leaders, state regulators and policy experts fear that Trump's order, depending on how it's implemented by federal agencies, could drive up premiums and make coverage less available in the regulated individual market, which helps people who need comprehensive benefits.

That's because healthier customers likely would move into the cheaper, leaner plans, prompting insurers to raise rates for more comprehensive plans or exit the market entirely.

"Association plans exempt from the ACA can cherrypick healthy people and make coverage unaffordable for those with pre-existing conditions," tweeted Larry Levitt, a senior vice president at the Kaiser Family Foundation. "Insurers will leave the ACA marketplaces as soon as they can or hike premiums a lot."

Trump's order directs the Departments of Treasury, Labor and HHS to develop regulations within 60 days to expand coverage through low-cost, short-term health plans that are exempt from ACA insurance market rules.

Such plans would not have to comply with requirements to cover 10 categories of minimum essential benefits or accept all applicants at the same rates without regard to pre-existing medical conditions.

The order apparently would allow individuals to buy such short-term plans lasting up to 364 days. Obama administration rules limited the duration of short-term plans to 90 days and did not permit renewal of such policies.

The order also directs the Secretary of Labor within 60 days to develop regulations to expand access to so-called association health plans, potentially allowing employers and perhaps even individuals to band together in health plans crossing state lines. The order suggests these plans also would not have to comply with ACA rules on benefits and other consumer protections.

The order did not explicitly direct the Labor Department to allow association plans to market to individuals, which many observers had expected the White House to do. But it said expanding access to AHPs would provide more affordable plan options to hourly wage earners, farmers, and entrepreneurs, suggesting Trump wants individuals to be able to enroll in them.

Up to now, federal and state rules have required sponsors of association health plans to be organizations of businesses and people in the same occupational line and that were previously established for purposes other than health insurance. The ACA has required them to offer plans that meet federal rules and those of the states in which they operate, including minimum benefit requirements.

Trump said in his order that the Secretary of Labor should consider broadening the criteria for AHPs—including easing the "commonality-of-interest" requirements—to make it easier for them to form and offer health insurance. "Expanding access to AHPs will also allow more small businesses to avoid many of the (ACA's) costly requirements," the order said.

That could encourage the formation of association plans deliberately designed to cherrypick healthier groups and individuals, warned Joel Ario, managing director of Manatt Health Solutions, who helped establish the federal exchange as an Obama administration official.

If faced with the possibility of losing cost-sharing subsidies, which insurers said was imperative to their rate-setting process and their ability to remain on the individual insurance exchanges, insurers would likely sue to recover money they believe is rightfully theirs, according to some experts.

The new regulations also could trigger legal challenges over whether they comply with the ACA and other federal statutes, including the McCarran-Ferguson Act, which gives states regulatory power over insurance, and the Employee Retirement Income Security Act, which governs self-funded health plans.

"Many commentators including me think the law should be changed to foster competition across state lines," said Stuart Gerson, a former top Justice Department official in the George H.W. Bush and Clinton administrations who's now a partner at Epstein Becker & Green. "But I don't think you can solve this problem without changing the law. It has to be done by statute, not regulation."

Trump's order would have to be implemented through the standard federal notice-and-comment process for federal agency rulemaking. That means any changes, particularly for AHPs, likely would take months and would not come in time for the 2018 plan year.

But consumers could potentially switch from standard individual-market plans to the liberalized short-term plans in the middle of the year. "It's possible somebody could drop coverage and enroll in a limited duration plan, depending on how the rules are written," said Adam Solander, also a partner at Epstein Becker & Green.

Hospitals, health insurers, and actuaries all expressed wariness about the impact of Trump's executive order.

"These provisions could destabilize the individual and small group markets, leaving millions of Americans who need comprehensive coverage to manage chronic and other pre-existing conditions, as well as protection against unforeseen illness and injury, without affordable options," the American Hospital Association said in written statement.

America's Health Insurance Plans raised concerns that freeing association health plans from market rules governing other types of plans would lead to market instability, higher premiums, erosion of consumer protections such as network adequacy, and increased potential for fraud and abuse.

The American Academy of Actuaries warned that the changes sought by Trump could present significant risks, including tilting the market in favor of plans with weaker benefits and solvency standards.

"Creating exemptions from the ACA's insurance market rules can have far-reaching and unintended consequences," said Cori Uccello, the Academy's senior fellow.

There were two unexpected provisions in Trump's executive order relating to healthcare market competition and price and quality transparency.

The order briefly directs federal agencies to consider ways to increase competition in healthcare markets by lowering barriers to entry, limiting excessive consolidation, and preventing abuses of market power.

It also instructs them to focus on improving access to information consumers need to make informed healthcare decisions, including data on prices and outcomes, while minimizing the burden on health plans and providers.